More Storm Clouds on the Economic FrontPosted on August 27th, 2009
It is likely that in the future, our government will no longer be able to provide for the economic and physical health of its citizens. Does this prospect frighten you? It should. But, fear can be a great motivator to take affirmative action. If you are not already doing so, start living below your means today. Begin saving today for those rainy days ahead. Yes, America is a free country. But you are not really free if you are dependent on others to sustain you.
If you need more convincing in order to be motivated to save consider the findings of Professor Laurence Kotlikoff. Dr. Kotlikoff is a leading authority on our federal government's economic ways and means. In his definitive article on this topic, "Is the U.S. Bankrupt?", he predicts that the United States may soon become bankrupt. ". . . the present value difference between all future government expenditures and all future receipts . . . the fiscal gap is a stunning $65.9 trillion! . . . more than five times U.S. GDP."
Yes indeed, the government has signed a gigantic IOU. In future dollars it exceeds the total personal wealth held by Americans today, approximately $50 trillion. And, who is planning to benefit most from those trillions that will be doled out in the future? According to Professor Kotlikoff, "There are 77 million baby boomers...all...hoping to collect tens of thousands of dollars in pension and healthcare benefits from the next generation. Our nation has done nothing to prepare for this onslaught of obligation ...countries...do go bankrupt. The U.S. ... seems headed down that path."
Currently in America there are 10 million more people who will reach retirement age in the next 20 years than there are those scheduled to enter the labor market. Plus, our birth rate is not high enough to generate even 1/2 of the economic growth required to fund our retirement promises. Could this problem be somehow related to our government's immigration policy or perhaps its lack of one? All that tough talk from Washington about erecting barriers and deporting millions of the so-called illegal aliens.... But in terms of real action does it seem to you to be a lot more smoke than lightening?
Here is at least part of the reason for a policy of inaction. The Wall Street Journal reported in July, 2006 that "The Social Security actuaries calculate that the addition of one million immigrants reduces the long-term unfounded liability of Social Security by at least $5 trillion." Consider the text of the advertisements from our government that may be placed in foreign newspapers all over the world one day: Attention Ambitious Workers! America is selling millions of citizenships. The country is nearly bankrupt because millions of irresponsible baby boomers spent all their earnings and now, as retirees, are dependent upon their government's dole. Please help these people by becoming a hard working American citizen!
An enlightened immigration policy is only part of the solution to our problem. We all need to provide for our own financial security by spending less and saving and investing more.
Great post. I am a new reader and have just finsihed "The Millionaire Next Door" Reading your work is changing the way I think and my consumption and saving habits. I am a UAW on the road to becoming a PAW. Excuse my ignorance but what is the first step I should take in regards to investing? I do not have much to invest and my annual salary does not allow much extra aside from my 10% pension plan contribution. Any advise would be welcomed and appreciated.On August 27th, 2009, 7:58 PM, James said:
Amen to that blog! Washington and those in power keep telling us that the end of the "recession" is near. Nothing could be further from the truth. I'd love to see a blog about the Federal Reserve (if you haven't already) and who and what they really are. They are about as Federal as Federal Express. Great work, Dr. Stanley!
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